Home / Business and Economy / PSU Lenders Eye $5B+ Offshore Funds Via RBI Hedging
PSU Lenders Eye $5B+ Offshore Funds Via RBI Hedging
11 Jun
Summary
- RBI's hedging facility aims to reduce dollar borrowing costs.
- Five PSU financiers plan to raise over $5 billion offshore.
- This move is expected to revive external commercial borrowings.
As of June 11, 2026, major public sector undertaking (PSU) financiers are poised to raise over $5 billion in offshore funds following the Reserve Bank of India's (RBI) introduction of a special hedging facility for dollar borrowings. This facility, effective until December 31, 2026, aims to substantially reduce the cost of accessing foreign currency debt.
Institutions such as Hudco, NaBFID, PFC, REC, and IRFC are preparing to tap into external commercial borrowings (ECBs). Hudco, for instance, plans to raise approximately $1 billion by the end of June 2026, anticipating costs 60-70 basis points lower than domestic bonds. NaBFID also intends to raise between $2-3 billion before the RBI window closes.
The RBI's scheme effectively covers the full cost of hedging dollar exposure for borrowings with a maximum tenor of five years. This initiative is reminiscent of a similar facility introduced during the 2013 taper tantrum and is expected to attract significant foreign capital inflows, potentially amounting to $50-70 billion according to some estimates.
This revival in offshore fundraising follows a slowdown last year, attributed to higher domestic rates and increased hedging costs. The new RBI facility aims to make foreign borrowing more attractive, with projections suggesting potential annual internal rates of return for investors. Local banks are also expected to benefit, potentially lowering their funding costs.
